In order to speed up turnover of funds in the Serbian economy, the Serbian parliament enacted a piece of legislation in 2012 regulating the terms of payment in commercial transactions, including ones in which public sector entities are debtors, and regulating the public sector’s obligation to register the received invoices – the Act on Terms of Payment in Commercial Transactions (the “Act”).

The latest amendments to the said Act were passed in December 2017, regulating the registering of invoices issued to public sector entities. These amendments require each invoice issued by a commercial entity to the public sector to be registered prior to sending. Subsequently, a new Registry of Invoices has been set up, and the Budgetary Inspection was delegated the authority to oversee the enforcement of provisions of the Act, starting from March 1, 2018.

All invoices to public sector entities now have to be registered with the Registry of Invoices, by the company issuing them, and sent to the public-sector debtors within three days of registration. In order to ensure compliance with new provisions it is stipulated that invoices not duly registered will not be paid by the National Treasury. To register invoices, a company will have to register itself with the Registry of Invoices and appoint an administrator of its account with the said Registry.

These amendments are meant to ensure greater control of the public debt, as well as to enable better planning of public sector spending and prevent possible deficits in public sector budgets due to inefficient planning.

A company violating the mandatory registration of invoices may be fined from 100,000 RSD (cca EUR 800) to 2,000,000 RSD (cca EUR 16,000).

The provisions laying down the maximum terms for payments in commercial transactions in Serbia have remained unchanged. All the invoices have to be paid within 60 days, and if a longer term for payment is stipulated by a contract, the term is considered to be 60 days. For payment in installments a term of 90 days may be stipulated. However in such case at least 50% of the debt has to be paid within the first half of the term.

In transactions in which the public sector entity is the debtor, the maximum term of payment is set at 45 days. The only exception is the National Health Insurance Fund, whose maximum term of payment is set at 90 days.

This legislation’s original aim was to stop the established practice of large retail companies forcing their suppliers to sign contracts with very long terms for payment, even up to 365 days. It also addressed the complaints from the private sector of public sector demanding prompt payment of taxes and other public revenues and on the other side delaying payments to their supplies and thus making the conducting of their business more difficult.

Public sector entities used a loophole in the legislation by simply not registering received invoices, thus making them “invisible” to the controlling authorities. This has been fixed by shifting the obligation to register the invoices onto the creditors.

However, although the maximum terms are stipulated, enforcement thereof is within the discretion of creditors. And they often choose not to enforce them in order to maintain “good relations” either with their largest customers or with public sector entities whose goodwill (or the goodwill of their management) is still often needed in various areas of conducting business in Serbia.